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At a small but growing airport, the local airline company is purchasing a new tractor for a tractor-trailer train to bring luggage to and from the airplanes. A new mechanized luggage system will be installed in 3 years, so the tractor will not be needed after that. However, because it will receive heavy use, so that the running and maintenance costs will increase rapidly as the tractor ages, it may still be more economical to replace the tractor after 1 or 2 years. The following table gives the total net discounted cost associated with purchasing a tractor (purchase price minus trade-in allowance, plus running and maintenance costs) at the end of year i and trading it in at the end of year j (where year 0 is now).

At a small but growing airport, the local airline company is purchasing a new tractor for a tractor-trailer train to bring luggage to and from the airplanes. A new mechanized luggage system will be installed in 3 years, so the tractor will not be needed after that. However, because it will receive heavy use, so that the running and maintenance costs will increase rapidly as the tractor ages, it may still be more economical to replace the tractor after 1 or 2 years. The following table gives the total net discounted cost associated with purchasing a tractor (purchase price minus trade-in allowance, plus running and maintenance costs) at the end of year i and trading it in at the end of year j (where year 0 is now).

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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At a small but growing airport, the local airline company is purchasing a new tractor for a tractor-trailer train to bring luggage to and from the airplanes. A new mechanized luggage system will be installed in 3 years, so the tractor will not be needed after that. However, because it will receive heavy use, so that the running and maintenance costs will increase rapidly as the tractor ages, it may still be more economical to replace the tractor after 1 or 2 years. The following table gives the total net discounted cost associated with purchasing a tractor (purchase price minus trade-in allowance, plus running and maintenance costs) at the end of year i and trading it in at the end of year j (where year O is now). i 012 1 $13,000 j 2 $28,000 $17,000 3 $48,000 $33,000 $20,000 The problem is to determine at what times (if any) the tractor should be replaced to minimize the total cost for the tractors over 3 years. (a) Formulate this problem as a minimum cost flow problem by showing the appropriate network representation.
Transcribed Image Text:At a small but growing airport, the local airline company is purchasing a new tractor for a tractor-trailer train to bring luggage to and from the airplanes. A new mechanized luggage system will be installed in 3 years, so the tractor will not be needed after that. However, because it will receive heavy use, so that the running and maintenance costs will increase rapidly as the tractor ages, it may still be more economical to replace the tractor after 1 or 2 years. The following table gives the total net discounted cost associated with purchasing a tractor (purchase price minus trade-in allowance, plus running and maintenance costs) at the end of year i and trading it in at the end of year j (where year O is now). i 012 1 $13,000 j 2 $28,000 $17,000 3 $48,000 $33,000 $20,000 The problem is to determine at what times (if any) the tractor should be replaced to minimize the total cost for the tractors over 3 years. (a) Formulate this problem as a minimum cost flow problem by showing the appropriate network representation.
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